Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes ý No o

Indicate by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

Indicate the number of shares outstanding of
each of the issuers classes of common stock: 110,855,122 shares of Common
Stock, $1 par value, outstanding as of August 6, 2005.

Except as otherwise specified and unless the
context otherwise requires, references to LP, the Company, we, us, and our
refer to Louisiana-Pacific Corporation and its subsidiaries.

Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 provide a safe harbor for forward-looking
statements to encourage companies to provide prospective information about
their businesses and other matters as long as those statements are identified
as forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those discussed in the statements. This report contains, and
other reports and documents filed by us with the Securities and Exchange
Commission may contain, forward-looking statements. These statements are or will be based upon
the beliefs and assumptions of, and on information available to, our
management.

The following statements are or may constitute forward-looking
statements: (1) statements preceded by,
followed by or that include words like may, will, could, should, believe,
expect, anticipate, intend, plan, estimate, potential, continue
or future or the negative or other variations thereof and (2) other
statements regarding matters that are not historical facts, including without
limitation, plans for product development, forecasts of future costs and
expenditures, possible outcomes of legal proceedings, completion of anticipated
asset sales and the adequacy of reserves for loss contingencies.

Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include, but are not
limited to the following:

changes in
general economic conditions;

changes in the
cost and availability of capital;

changes in the
level of home construction activity;

changes in
competitive conditions and prices for our products;

changes in the
relationship between supply of and demand for building products, including the
effects of industry-wide increases in manufacturing capacity;

changes in the
relationship between supply of and demand for raw materials, including wood
fiber and resins, used in manufacturing our products;

changes in the
cost of and availability of energy, primarily natural gas, electricity and
diesel fuel;

changes in other
significant operating expenses;

changes in
exchange rates between the U.S. dollar and other currencies, particularly the
Canadian dollar, EURO and the Chilean peso;

changes in
general and industry-specific environmental laws and regulations;

changes in
circumstances giving rise to environmental liabilities or expenditures;

the resolution
of product-related litigation and other legal proceedings; and

In addition to the foregoing and any risks and uncertainties
specifically identified in the text surrounding forward-looking statements, any
statements in the reports and other documents filed by us with the Commission
that warn of risks or uncertainties associated with future results, events or
circumstances identify important factors that could cause actual results,
events and circumstances to differ materially from those reflected in the
forward-looking statements.

ABOUT THIRD PARTY
INFORMATION

In this report, we rely on and refer to information regarding industry
data obtained from market research, publicly available information, industry
publications, U.S. government sources and other third parties. Although we
believe the information is reliable, we cannot guarantee the accuracy or
completeness of the information and have not independently verified it.

2

Item 1. Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
LOUISIANA-PACIFIC CORPORATION AND SUBSIDIARIES
(AMOUNTS IN MILLIONS EXCEPT PER SHARE) (UNAUDITED)

Quarter Ended June 30,

Six Months Ended June 30,

2005

2004

2005

2004

Net Sales

$

692.0

$

790.2

$

1,353.4

$

1,464.0

OPERATING COSTS AND EXPENSES

Cost of sales

463.5

416.8

889.1

775.3

Depreciation, amortization and depletion

32.4

31.4

65.3

64.2

Selling and administrative

36.1

40.4

73.7

81.8

(Gain) loss on sale or impairment of long
lived assets

(0.7

)

0.2

(0.9

)

13.0

Other operating credits and charges, net

1.4

2.4

1.1

9.1

Total operating costs and expenses

532.7

491.2

1,028.3

943.4

Income from operations

159.3

299.0

325.1

520.6

NON-OPERATING INCOME (EXPENSE)

Foreign currency exchange (loss) gain

(1.4

)

1.3

(2.0

)

1.1

Loss on early extinguishment of debt



(1.2

)



(41.3

)

Interest expense, net of capitalized
interest

(15.3

)

(15.4

)

(31.0

)

(35.4

)

Investment income

16.9

9.0

32.4

19.3

Total non-operating income (expense)

0.2

(6.3

)

(0.6

)

(56.3

)

Income before taxes and equity in earnings of
unconsolidated affliates

159.5

292.7

324.5

464.3

Provision for income taxes

55.2

105.4

115.5

168.0

Equity in (earnings) unconsolidated
affliates

(0.1

)

(0.8

)

(0.8

)

(1.3

)

Income from continuing operations

104.4

188.1

209.8

297.6

DISCONTINUED OPERATIONS

Income (loss) from discontinued operations

(6.6

)

7.0

(12.6

)

2.1

Income tax provision (benefit)

(2.5

)

2.7

(4.8

)

0.8

Income (loss) from discontinued operations

(4.1

)

4.3

(7.8

)

1.3

Net income

$

100.3

$

192.4

$

202.0

$

298.9

Net income per share of common stock
(basic):

Income from continuing operations

$

0.94

$

1.73

$

1.90

$

2.76

Income (loss) from discontinued operations

(0.04

)

0.04

(0.07

)

0.01

Net Income - per share basic

$

0.90

$

1.77

$

1.83

$

2.77

Net income per share of common stock
(diluted):

Income from continuing operations

$

0.94

$

1.71

$

1.89

$

2.72

Income (loss) from discontinued operations

(0.04

)

0.04

(0.07

)

0.01

Net Income - per share diluted

$

0.90

$

1.75

$

1.82

$

2.73

Average shares of stock outstanding - basic

110.9

109.0

110.5

107.9

Average shares of stock outstanding -
diluted

111.5

110.2

111.3

109.3

Cash dividend per share

$

0.125

$

0.075

$

0.225

$

0.125

The
accompanying notes are an integral part of these unaudited financial
statements.

The accompanying notes are an integral part of these
unaudited financial statements.

7

NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS FOR PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion
of management, include all adjustments (consisting of normal recurring
adjustments, except for other operating credits and charges, net and (gain)
loss on sale or impairment of long-lived assets referred to in Notes 8 and 9
and certain charges recorded in discontinued operations discussed in Note 6)
necessary to present fairly, in all material respects, the consolidated
financial position, results of operations and cash flows of LP and its
subsidiaries for the interim periods presented. Results of operations for
interim periods are not necessarily indicative of results to be expected for an
entire year. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in LPs Annual Report on
Form 10-K for the year ended December 31, 2004.

NOTE 2 - RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the
current period presentation. LP has
announced its intent to divest its vinyl operations. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, LP is required to account for the
businesses anticipated to be sold within one year as discontinued operations.
Accordingly, commencing with the quarter ended June 30, 2005, LP is classifying
its vinyl operations as discontinued operations and has reclassified all
periods presented in the same manner.

Additionally, in LPs Consolidated Statement of Cash Flows for the six month period ended June 30, 2005, the classification of changes in restricted cash balances have been reclassified to present such changes as an investing activity. Previously these changes were presented as a financing activity. In the accompanying Consolidated Statement of Cash Flows for the six months ended June 30, 2004, changes in restricted cash balances were reclassified to be consistent with the 2005 presentation resulted in a $29.3 million increase to investing cash flows and a corresponding decrease to financing cash flows from the amounts previously reported.

Auction rate securities totaling $205 million as of June 30, 2004, which were previously reported in our consolidated balance sheets and consolidated statements of cash flows as cash equivalents, have been reclassified to short-term investments to conform to the presentation of auction rate securities as short-term investments as of December 31, 2004 and June 30, 2005. This reclassification had no impact on LPs results of operations, total assets or changes in stockholders equity.

NOTE 3  EARNINGS PER SHARE

Basic earnings per share are based on the weighted-average number of
shares of common stock outstanding. Diluted earnings per share are based upon
the weighted-average number of shares of common stock outstanding plus all
potentially dilutive securities which were assumed to be converted into common
shares at the beginning of the period under the treasury stock method. This
method requires that the effect of potentially dilutive common stock
equivalents (employee stock options and incentive shares) be excluded from the
calculation of diluted earnings per share for the periods in which losses from
continuing operations are reported because the effect is anti-dilutive. The following table sets forth the
computation of basic and diluted earnings per share (in millions, except per
share amounts):

8

Dollar and share amounts in millions, except per

Quarter Ended June 30,

Six Months Ended June 30,

share amounts

2005

2004

2005

2004

Numerator:

Income attributed to common shares:

Income from continuing operations

$

104.4

$

188.1

$

209.8

$

297.6

Income (loss) from discontinued operations

(4.1

)

4.3

(7.8

)

1.3

Net income

$

100.3

$

192.4

$

202.0

$

298.9

Denominator:

Basic - weighted average common shares
outstanding

110.9

109.0

110.5

107.9

Dilutive effect of employee stock plans

0.6

1.2

0.8

1.4

Diluted shares outstanding

111.5

110.2

111.3

109.3

Basic earnings per share:

Income from continuing operations

$

0.94

$

1.73

$

1.90

$

2.76

Income (loss) from discontinued operations

(0.04

)

0.04

(0.07

)

0.01

Net income per share

$

0.90

$

1.77

$

1.83

$

2.77

Diluted earnings per share:

Income from continuing operations

$

0.94

$

1.71

$

1.89

$

2.72

Income (loss) from discontinued operations

(0.04

)

0.04

(0.07

)

0.01

Net income per share

$

0.90

$

1.75

$

1.82

$

2.73

Stock options to purchase approximately 0.3 million shares at June 30,
2005 and 0.2 million shares at June 30, 2004 were considered anti-dilutive or
not in-the-money for purposes of LPs earnings per share calculation.

NOTE 4  STOCK-BASED COMPENSATION

Stock options and other stock-based compensation awards are accounted
for using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. See Note 14 of the Notes to the financial statements included
in Item 8 of LPs Annual Report on Form 10-K for the year ended December 31,
2004 for further discussion of LPs stock plans. The following table
illustrates the effect on net income per share as if LP had applied the fair
value recognition provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, to stock-based
employee compensation.

Deduct: Total stock-based employee
compensation expense determined under fair value based method for all awards,
net of related tax effects

(0.6

)

(1.6

)

(1.3

)

(3.7

)

Pro forma net income

$

100.0

$

191.6

$

201.3

$

297.3

Net income per sharebasic, as reported

$

0.90

$

1.77

$

1.83

$

2.77

Net income per share diluted, as reported

$

0.90

$

1.75

$

1.82

$

2.73

Net income per sharebasic, proforma

$

0.90

$

1.76

$

1.82

$

2.76

Net income per share diluted, proforma

$

0.90

$

1.74

$

1.81

$

2.72

NOTE 5  INVENTORIES

Inventories are valued at the lower of cost or market. Inventory cost
includes materials, labor and operating overhead. The LIFO (last-in, first-out)
method is used for certain log inventories with remaining inventories valued at
FIFO (first-in, first-out) or average cost. The major types of inventories
(excluding discontinued operations) are as follows (work in process is not
material):

Dollar amounts in millions

June 30, 2005

December 31, 2004

Logs

$

55.6

$

59.0

Other raw materials

39.8

36.8

Finished products

117.8

102.6

Supplies

8.0

7.8

LIFO reserve

(2.7

)

(2.7

)

Total

$

218.5

$

203.5

Inventory included in current assets of
discontinued operations

Logs

$



$

1.1

Other raw materials

3.3

3.4

Finished products

14.2

14.9

Supplies

0.1

0.2

Total

$

17.6

$

19.6

The preparation of interim financial statements requires the estimation
of LPs year-end inventory quantities and costs for purposes of determining
LIFO inventory adjustments. These
estimates are revised quarterly and the estimated incremental change in the
LIFO inventory reserve is recognized over the remainder of the year.

10

NOTE 6  BUSINESSES HELD FOR SALE AND DIVESTITURES

In 2003, LP announced further divestures from its original 2002 plan to
sell or close most of its remaining lumber mills as well as an interior hardboard
panel operation. In 2004, LP announced that it intended to also sell its cedar
lumber operation in British Columbia, Canada. LP subsequently announced in the
first quarter of 2005 that it would permanently close this cedar facility.
During the second quarter of 2005, LP announced that it intended to sell its
vinyl operations. At June 30, 2005, LP
had two vinyl plants classified as discontinued.

Sales and income (loss) for these businesses are as follows:

Quarter Ended June 30,

Six Months Ended June 30,

Dollar amounts in millions

2005

2004

2005

2004

Sales

$

44.6

$

76.0

$

82.7

$

153.1

Income (loss) from discontinued operations,
net of tax

$

(4.1

)

$

4.3

$

(7.8

)

$

1.3

Included in income (loss) from discontinued operations for the six
months ended June 30, 2004 is income of $3.7 million associated with the
liquidation of certain LIFO inventories due to reduced log inventories at sites
to be sold or closed.

In the first quarter of 2004, LP recorded a loss of $6.7 million
associated with impairment charges on assets held for sale. Additionally, LP
recorded a loss of $2.1 million on the sale of a lumber facility in Montana; a
loss of $0.2 million related to severance charges; and a loss of $0.4 million
on a timber contract associated with previously sold or closed facilities.

In the second quarter of 2004, LP recorded a gain of $1.3 million
associated with the settlement of a contingency regarding the sale of a lumber
facility in Idaho.

In the first quarter of 2005, LP recorded a loss of $3.3 million
related to severance charges associated with a cedar facility in British
Columbia.

In the second quarter of 2005, LP recorded a gain of $1.6 million
associated with the sale of a lumber facility in Michigan and a loss of $5.0
million associated with impairment charges on assets held for sale.

The assets of the discontinued operations included in the accompanying
condensed consolidated balance sheets as of June 30, 2005 and December 31, 2004
are as follows:

Dollar amounts in millions

June 30, 2005

December 31, 2004

Inventories

$

17.6

$

19.6

Timber and timberlands

0.4

0.7

Property, plant and equipment

51.3

84.6

Accumulated depreciation

(24.6

)

(33.2

)

Net, property, plant and equipment

26.7

51.4

Goodwill



3.1

Total long-term assets of discontinued
operations

27.1

55.2

Total assets of discontinued operations

$

44.7

$

74.8

NOTE 7  INCOME TAXES

Accounting standards require that the estimated effective income tax
rate (based upon estimated annual amounts of taxable income and expense) by
income component for the year be applied to year-to-date income or loss at the
end

11

of each quarter. In 2005, the primary difference between the U.S.
statutory rate of approximately 39% and the effective rate on continuing
operations relates to differences associated with non-taxable foreign currency
exchange gains on certain intercompany debt that is denominated in Canadian
dollars, recognition of the manufacturing deduction associated with the Jobs
Creation Act of 2004, and a significant portion of income that will be taxable
in foreign jurisdictions at lower tax rates. The components and associated
estimated effective income tax rates applied to the six-month periods ended
June 30 are as follows:

Six Months Ended June 30,

2005

2004

Tax Provision

Tax Rate

Tax Provision

Tax Rate

Continuing operations

$

115.5

36

%

$

168.0

36

%

Discontinued operations

(4.8

)

38

%

0.8

38

%

$

110.7

35

%

$

168.8

36

%

NOTE 8 - OTHER OPERATING CREDITS AND CHARGES, NET

The major components of Other operating credits and charges, net in
the Condensed Consolidated Statements of Income for the quarter and six months
ended June 30 are reflected in the table below and are described in the
paragraphs following the table:

Quarter Ended June 30,

Six Months Ended June 30,

Dollar amounts in millions

2005

2004

2005

2004

Change in environmental contingency
reserves

$



$



$



$

1.7

Charges associated with corporate
relocation

(1.5

)

(2.4

)

(2.1

)

(4.4

)

Increase in litigation reserves







(6.0

)

Loss related to assets and liabilities
transferred under contractual arrangement

0.1



0.9



Other





0.1

(0.4

)

$

(1.4

)

$

(2.4

)

$

(1.1

)

$

(9.1

)

In the first quarter of 2004, LP recorded a gain of $1.7 million
associated with a reduction in environmental reserves related to our former
Alaska operations, a charge of $6.0 million for an increase in litigation
reserves due to an adverse court ruling and a charge of $2.0 million associated
with the relocation and consolidation of LPs corporate offices to Nashville,
Tennessee.

In
the second quarter of 2004, LP recorded a charge of $2.4 million associated
with the relocation and consolidation of LPs corporate offices to Nashville,
Tennessee.

In
the first quarter of 2005, LP recorded a gain of $0.9 million associated with
the recovery of a previous loss associated with the sale of the Samoa,
California pulp mill and a charge of $0.6 million associated with the
relocation and consolidation of LPs corporate offices to Nashville, Tennessee.

In
the second quarter of 2005, LP recorded a charge of $1.5 million associated
with the relocation and consolidation of LPs corporate offices to Nashville,
Tennessee.

NOTE 9  GAINS (LOSSES) ON SALE OR IMPAIRMENT OF LONG-LIVED ASSETS

The major components of Gain (loss) on sale or impairment of
long-lived assets in the Condensed Consolidated
Statements of Income for the quarter and six months ended June 30 are reflected
in the table below and are

12

described in the paragraph following the
table:

Quarter Ended June 30,

Six Months Ended June 30,

Dollar amounts in millions

2005

2004

2005

2004

Loss on sale of long-lived assets

$

(0.5

)

$

(0.2

)

$

(0.3

)

$

(0.1

)

Impairment (charges) reversals on long-term
assets

1.2



1.2

(12.9

)

$

0.7

$

(0.2

)

$

0.9

$

(13.0

)

In the first quarter of 2004, LP recorded a loss of $9.7 million on the
cancellation of a capital project to build a veneer mill in British Columbia
and $3.2 million for impairment of timber rights associated with a cedar mill
in British Columbia, Canada to reduce the book value to the estimated
realizable sales value.

In the second quarter of 2005, LP reversed $1.2 million of the
impairment recorded in the first quarter of 2004 due to managements decision
to continue to retain and operate certain timber rights previously classified
as discontinued operations.

NOTE 10  LEGAL AND ENVIRONMENTAL MATTERS

The description of certain legal and environmental matters involving LP
set forth in Part II of this report under the caption Legal Proceedings is
incorporated herein by reference.

NOTE 11  SELECTED SEGMENT DATA

LP operates in three segments: Oriented Strand Board (OSB); Siding; and
Engineered Wood Products (EWP). LPs business units have been aggregated into
these three segments based upon the similarity of economic characteristics,
customers and distribution methods. LPs results of operations are summarized
below for each of these segments separately as well as for the other category
which comprises other products that are not individually significant. Segment information was prepared in
accordance with the same accounting principles as those described in Note 1 of
the Notes to the financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2004.

Quarter Ended June 30,

Six Months Ended June 30,

2005

2004

%

2005

2004

%

Net sales:

OSB

$

403.9

$

535.9

(25

)

$

820.1

$

992.5

(17

)

Siding

125.2

113.8

10

220.6

211.2

4

Engineered Wood Products

120.5

103.6

16

229.8

183.0

26

Other

45.6

37.6

21

88.4

81.8

8

Less: Intersegment sales

(3.2

)

(0.7

)



(5.5

)

(4.5

)



$

692.0

$

790.2

(12

)

$

1,353.4

$

1,464.0

(8

)

Operating profit (loss):

OSB

$

146.6

$

309.1

(53

)

$

317.9

$

562.7

(44

)

Siding

16.4

16.4

0

23.4

27.7

(16

)

Engineered Wood Products

12.1

0.7

1629

17.7

(0.2

)

8950

Other

5.2

3.1

68

10.7

6.6

62

Other operating credits and charges, net

(1.4

)

(2.4

)

42

(1.1

)

(9.1

)

88

Gain (loss) on sales of and impairment of
on long lived assets

0.7

(0.2

)

450

0.9

(13.0

)

107

General corporate and other expenses, net

(20.2

)

(26.9

)

25

(43.6

)

(52.8

)

17

Early extinguishment of debt



(1.2

)





(41.3

)



Foreign currency gains (losses)

(1.4

)

1.3

(208

)

(2.0

)

1.1

(282

)

Investment income (interest expense), net

1.6

(6.4

)

125

1.4

(16.1

)

109

Income from operations before taxes

159.6

293.5

(46

)

325.3

465.6

(30

)

Provision for income taxes

55.2

105.4

48

115.5

168.0

31

Income from continuing operations

$

104.4

$

188.1

(44

)

$

209.8

$

297.6

(30

)

13

NOTE 12  POTENTIAL IMPAIRMENTS

LP continues to review certain operations and investments for potential
impairments. LPs management currently believes it has adequate support for the
carrying value of each of these assets based upon the anticipated cash flows
that result from estimates of future demand, pricing and production costs
assuming certain levels of planned capital expenditures. However, should the
markets for the relevant products deteriorate to levels significantly below
cycle average pricing or should LP decide to invest capital in alternative
projects, it is possible that impairment charges will be required.

LP also reviews from time to time
possible dispositions of various assets in light of current and anticipated
economic and industry conditions, its strategic plan and other relevant
circumstances. Because a determination to dispose of particular assets can
require management to make assumptions regarding the transaction structure of
the disposition and to estimate the net sales proceeds, which may be less than
previous estimates of undiscounted future net cash flows, LP may be required to
record impairment charges in connection with decisions to dispose of assets.

LPs primary Canadian subsidiary has arrangements with the Canadian
provincial governments which gives this subsidiary the right to harvest a
volume of wood off public land from defined forest areas under supply and
management agreements, long-term pulpwood agreements and various other timber
licenses. In early 2005, the Quebec government announced changes to the
provincial timber license structure. These included a reduction in the
harvesting rights for holders of certain long-term timber licenses. LP
currently anticipates that these changes will not affect LPs timber licenses
associated with our OSB facilities in Quebec; however, it may affect LPs
timber allocations associated with its sawmill operations in Quebec. As of the
date of this report, management was unable to predict what effects these
changes will have on this operation.

NOTE 13  CONTINGENCY RESERVES

LP is involved in various legal proceedings
incidental to LPs business and is subject to a variety of environmental and
pollution control laws and regulations in all jurisdictions in which we
operate. LP maintains reserves for these various contingencies as follows:

Dollar amounts in millions

June 30, 2005

December 31, 2004

Environmental reserves

$

9.7

$

11.4

Hardboard siding reserves

34.5

37.2

Other

5.2

5.5

Total contingency reserves

49.4

54.1

Current portion of contingency reserves

(12.0

)

(12.0

)

Long-term portion of contingency reserves

$

37.4

$

42.1

Hardboard Siding Reserves

LP has established reserves relating to certain
liabilities associated with products manufactured that were the subject of a
nationwide class action lawsuit. This settlement agreement relates to a
nationwide class action suit involving hardboard siding manufactured or sold by
corporations acquired by LP in 1999 and installed prior to May 15, 2000
and was approved by the applicable courts in 2000. This settlement is discussed
in greater detail in the Notes to financial statements included in LPs Annual
Report on Form 10-K for the year ended December 31, 2004.

LP and its subsidiaries are parties to other legal proceedings. Based
on the information currently available, management believes that the resolution
of such proceedings will not have a material adverse effect on the financial
position, results of operations, cash flows or liquidity of LP.

NOTE 14 - EARLY DEBT
EXTINGUISHMENT

During the first six months of 2004, LP
repurchased $197.4 million of its publicly traded debt obligations ($193.6

14

million of the 10.875% Subordinated Notes and
$3.8 million of the 8.5% Senior Notes). In connection with the repurchase, LP
recorded a charge of $41 million to reflect the premiums paid and certain
transaction costs.

NOTE 15  DEFINED BENEFIT PENSION PLANS

The
following table sets forth the net
periodic pension cost for LPs defined benefit pension plans during the quarter
and six months period ended June 30, 2005 and 2004. The net periodic pension
cost included the following components:

Quarter Ended June 30,

Six Months Ended June 30,

Dollar amounts in millions

2005

2004

2005

2004

Sevice cost

$

2.5

$

1.7

$

5.0

$

4.1

Interest cost

3.7

2.6

7.4

5.8

Expected return on plan assets

(3.9

)

(2.8

)

(7.8

)

(6.3

)

Amortization of prior service cost and
transition assets

0.2

0.2

0.4

0.4

Recognized net actuarial loss

1.4

1.1

2.8

2.5

Net periodic pension cost

$

3.9

$

2.8

$

7.8

$

6.5

Through June 30, 2005, LP recognized $7.8 million
of pension expense for all of LPs defined benefit plans. We presently
anticipate recognizing an additional $7.8 million of pension expense in the
remainder of 2005 for a total of $15.6 million.

Through June 30, 2005, LP made $12 million of
pension contributions for all of LPs defined benefit plans. LP presently
anticipates contributing an additional $3 to $8 million to fund LPs defined
benefit plans in the remainder of 2005 for a total of $15 to $20 million.

NOTE 16 - GUARANTEES AND INDEMNIFICATIONS

LP is a party to contracts in which LP agrees to indemnify third
parties for certain liabilities that arise out of or relate to the subject
matter of the contract. In some cases, this indemnity extends to liabilities
arising out of the negligence of the indemnified parties, but usually excludes
any liabilities caused by gross negligence or willful misconduct of the
indemnified parties. LP cannot estimate the potential amount of future payments
under these agreements until events arise that would trigger the liability. See
Note 20 of the Notes to the financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2004 for further discussion of LPs
guarantees and indemnifications.

Additionally, LP provides warranties on product sales. The reserves for
these warranties are determined by applying the provisions of SFAS No. 5, Accounting
for Contingencies. The activity in warranty reserves for the first six months
of 2005 and 2004 are summarized in the following table:

Dollar amounts in millions

June 30, 2005

June 30, 2004

Beginning Balance, December 31,

$

22.2

$

21.0

Accrued to expense

2.9

3.3

Payments made

(3.1

)

(4.9

)

Balance, June 30

22.0

19.4

Current portion of warranty reserve

(7.0

)

(7.0

)

Long-term portion of warranty reserves

$

15.0

$

12.4

The current
portion of the warranty reserve is included in the caption accounts payable
and accrued liabilities and the long-term portion is included in the caption other
long-term liabilities on LPs balance sheet.

15

NOTE 17  POTENTIAL INSURANCE RECOVERY

LP filed suit in June, 2001, against one of ABT Co, Incs insurers
seeking indemnity, defense costs, and declaratory relief for claims arising out
of a coverage dispute in the ABTco Hardboard Siding Settlement. On May 31, 2005, after trial by jury and
post-trial motions filed by the insurer, the United States District Court for
the Western District of North Carolina entered judgment in favor of LP,
ordering that the insurer pay damages in the amount of $11.7 million ($3.9
million damages trebled under the applicable statute), plus $2.5 million
representing the insurers share of defense costs for the underlying hardboard
siding suit, and that the insurer indemnify against 77.5% of any liability and
a portion of the administrative costs associated with certain future claims
that fall within the insurers policy periods.
On May 31, 2005, the judge also ordered the insurer to reimburse
the Company $2 million for the costs in prosecuting this case. On June 29, 2005, the insurer filed a Notice
of Appeal. LP has not recorded any gain
in connection with this judgment as the matter remains on appeal and any such
gain is contingent on prevailing in part or in whole at the appellate court.

NOTE 18 - RECENT AND
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS

In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123R, Share-Based Payment (Revised 2004). This statement addresses the
accounting for share-based payment transactions in which a company receives
employee services in exchange for the companys equity instruments or
liabilities that are based on the fair value of the companys equity securities
or may be settled by the issuance of these securities. SFAS No. 123R eliminates
the ability to account for share-based compensation using APB 25 and generally
requires that such transactions be accounted for using a fair value method. The
provisions of this statement are effective for financial statements issued for
fiscal periods beginning after December 15, 2005 and will become effective for
LP beginning with the first quarter of 2006. LP has yet to determine a
transition method to adopt SFAS 123R or which valuation method to use. The full
impact that the adoption of this statement will have on our financial position
and results of operations will be determined by share-based payments granted in
future periods, the transition method and valuation model used.

In March 2005, the FASB issued Interpretation FIN No. 47, Accounting
for Conditional Asset Retirement Obligations  An Interpretation of FASB
Statement No. 143(FIN 47),
which will result in more consistent recognition of liabilities relating to
asset retirement obligations. FIN 47 clarifies that the term conditional asset
retirement obligation as used in SFAS No.143, Accounting for Asset Retirement
Obligations which refers to a legal obligation to perform an asset retirement
activity in which the timing and (or) method of settlement are conditional on a
future event that may or may not be within the control of the entity. The
obligation to perform the asset retirement activity is unconditional even
though uncertainty exists about the timing and (or) method of settlement.
Uncertainty about the timing and (or) method of settlement of a conditional
asset retirement obligation should be factored into the measurement of the
liability when sufficient information exists. FIN 47 also clarifies when an
entity would have sufficient information to reasonably estimate the fair value
of an asset retirement obligation. FIN 47 is effective no later than the end of
fiscal years ending after December 15, 2005. Management is currently evaluating
the impacts of this statement.

16

Item 2. Managements Discussion and Analysis

GENERAL

Our products are used primarily in new home construction, repair and
remodeling, and manufactured housing. We
also market and sell our products in light industrial and commercial
construction, have a modest export business for some of our specialty building
products and operate a facility in Chile.

To serve these markets, we operate in three segments: Oriented Strand Board (OSB), Siding, and
Engineered Wood Products (EWP). OSB is the most significant segment, accounting
for more than 60% of sales during the six month period ended June 30, 2005 and
more than 65% of sales in the six months ended June 30, 2004.

During the six months ended June 30, 2005, compared to the comparable
period of 2004, we saw continued increases in the cost of petroleum-based raw
materials and wood throughout our businesses. In our non-commodity based
businesses, we were able to implement price increases to partially mitigate
these cost increases.

Our most significant product, OSB, is sold as a commodity for which
sales prices fluctuate daily based on market factors over which we have little
or no control. We cannot predict whether
the prices of our products will remain at current levels or increase or
decrease in the future. During the first
six months of 2005, commodity OSB prices moderated significantly compared to
the same period in the prior year but nonetheless remained at cyclically high
levels.

For additional factors affecting our results, refer to the Management Discussion
and Analysis overview contained in our Annual Report on Form 10-K for the year
ended December 31, 2004.

LPs significant accounting policies are
discussed in Note 1 of Notes to financial statements included in LPs Annual
Report on Form 10-K for the year ended December 31, 2004. While it is important
to review and understand all of these policies when reading our financial
statements, there are several policies that we have adopted and implemented
from among acceptable alternatives that could lead to different financial
results had another policy been chosen:

Inventory valuation. We
use the LIFO (last-in, first-out) method for some of our log inventories with
the remaining inventories valued at FIFO (first-in, first-out) or average cost.
Our inventories would have been approximately $2.7 million higher if the LIFO
inventories were valued at average cost as of June 30, 2005.

Property, plant and equipment. We
principally use the units of production method of depreciation for machinery
and equipment. This method amortizes the cost of machinery and equipment over
the estimated units that will be produced during its estimated useful life.

Stock options. We
have chosen to report our stock based compensation using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees under which no compensation cost for stock
options is recognized for stock options granted at or above fair market value.
As permitted, we apply only the disclosure provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation
which establishes a fair value approach to measuring compensation expense
related to employee stock compensation plans. Had compensation expense for our
stock-based compensation plans been determined based upon the fair value at the
grant dates under those plans consistent with SFAS No. 123, our net income
would have been lower. For the six month period ended June 30, 2005, had we
recorded this compensation expense, our net income would have been lower by
$0.7 million. In the later portion of 2004, the FASB issued SFAS No. 123R,
which will require us to use the fair value method beginning in 2006.

SIGNIFICANT ACCOUNTING
ESTIMATES AND JUDGMENTS

Throughout the preparation of the financial
statements, we employ significant judgments in the application of accounting
principles and methods. These judgments
are primarily related to the assumptions used to arrive at

17

various estimates. For 2005, these significant accounting
estimates and judgments include:

Legal Contingencies. Our estimates of our loss contingencies for
legal proceedings are based on various judgments and assumptions regarding the
potential resolution or disposition of the underlying claims and associated
costs. In making judgments and assumptions regarding legal contingencies for
ongoing class action settlements, we consider, among other things, discernible
trends in the rate of claims asserted and related damage estimates, information
obtained through consultation with statisticians and economists, including
statistical analyses of potential outcomes based on experience to date and the
experience of third parties who have been subject to product-related claims
judged to be comparable. Due to the numerous variables associated with these
judgments and assumptions, both the precision and reliability of the resulting
estimates of the related loss contingencies are subject to substantial
uncertainties. We regularly monitor our estimated exposure to these
contingencies and, as additional information becomes known, may change our
estimates significantly.

Environmental Contingencies. Our estimates of our loss contingencies for
environmental matters are also based on various judgments and assumptions.
These estimates typically reflect judgments and assumptions relating to the
probable nature, magnitude and timing of required investigation, remediation and/or
monitoring activities and the probable cost of these activities, and in some
cases reflect judgments and assumptions relating to the obligation or
willingness and ability of third parties to bear a proportionate or allocated
share of the cost of these activities, including third parties who purchased
assets from us subject to environmental liabilities. We consider the ability of
third parties to pay their apportioned cost when developing our estimates. In
making these judgments and assumptions related to the development of our loss
contingencies, we consider, among other things, the activity to date at
particular sites, information obtained through consultation with applicable
regulatory authorities and third-party consultants and contractors and our historical
experience at other sites that are judged to be comparable. Due to the numerous variables associated with
these judgments and assumptions, and the effects of changes in governmental
regulation and environmental technologies, both the precision and reliability
of the resulting estimates of the related contingencies are subject to
substantial uncertainties. We regularly monitor our estimated exposure to
environmental loss contingencies and, as additional information becomes known,
may change our estimates significantly. At June 30, 2005, we excluded from our
estimates approximately $6 million of potential environmental liabilities that
we estimate will be allocated to third parties pursuant to existing and
anticipated future cost sharing arrangements.

Impairment of Long-Lived Assets. We review the long-lived assets held and used
by us (primarily property, plant and equipment and timber and timberlands) for
impairment when events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable. Identifying these events and changes
in circumstances, and assessing their impact on the appropriate valuation of
the affected assets under accounting principles generally accepted in the U.S.,
requires us to make judgments, assumptions and estimates. In general, on assets held and used,
impairments are recognized when the book values exceed our estimate of the
undiscounted future net cash flows associated with the affected assets. The key
assumptions in estimating these cash flows include future production volumes
and pricing of commodity products and future estimates of expenses to be
incurred. Our assumptions regarding pricing are based upon the average pricing
over the commodity cycle (generally five years) due to the inherent volatility
of commodity product pricing. These prices are estimated from information
gathered from industry research firms, research reports published by investment
analysts and other published forecasts. Our estimates of expenses are based
upon our long-range internal planning models and our expectation that we will
continue to reduce product costs that will offset inflationary impacts.

When impairment is indicated, the book values of the assets to be held
and used are written down to their estimated fair value that is generally based
upon discounted future cash flows. Assets to be disposed of are written down to
their estimated fair value, less estimated sales costs. Consequently, a
determination to dispose of particular assets can require us to estimate the
net sales proceeds expected to be realized upon such disposition, which may be
less than the estimated undiscounted future net cash flows associated with such
assets prior to such determination, and thus require an impairment charge. In
situations where we have experience in selling assets of a similar nature, we
may estimate net sales proceeds on the basis of that experience. In other situations, we hire independent
appraisers to estimate net sales proceeds. Due to the numerous variables
associated with our judgments and assumptions relating to the valuation of
assets in these circumstances, and the effects of changes in circumstances
affecting these valuations, both the precision and reliability of the resulting
estimates of the related impairment charges are subject to substantial
uncertainties and, as additional information becomes known, we may change our
estimates significantly.

18

Income Taxes. The
determination of the provision for income taxes, and the resulting current and
deferred tax assets and liabilities, involves significant management judgment,
and is based upon information and estimates available to management at the time
of such determination. The final income tax liability to any taxing jurisdiction
with respect to any calendar year will ultimately be determined long after our
financial statements have been published for that year. We maintain reserves
for known estimated tax exposures in federal, state and international
jurisdictions; however, actual results may differ materially from our
estimates.

Judgment is also applied in determining whether deferred tax assets
will be realized in full or in part. When we consider it to be more likely than
not that all or some portion of a deferred tax asset will not be realized, a
valuation allowance is established for the amount of the deferred tax asset
that is estimated not to be realizable. As of June 30, 2005, we had established
valuation allowances against certain deferred tax assets, primarily related to
state net operating loss and credit carryovers and foreign capital loss
carryovers. We have not established valuation allowances against other deferred
tax assets based upon expected future taxable income and/or tax strategies
planned to mitigate the risk of impairment of these assets. Accordingly,
changes in facts or circumstances affecting the likelihood of realizing a
deferred tax asset could result in the need to record additional valuation
allowances.

Goodwill. Goodwill
and other intangible assets that are deemed to have an indefinite life are no
longer amortized. However, these indefinite life assets are tested for
impairment on an annual basis, and otherwise when indicators of impairment are
determined to exist, by applying a fair value based test. The process of evaluating the potential
impairment of goodwill is highly subjective and requires significant judgments
at many points during the analysis. In
testing for potential impairment, the estimated fair value of the reporting
unit, as determined based upon cash flow forecasts, is compared to the book
value of the reporting unit. The key assumptions in estimating these cash flows
include future production volumes and pricing of commodity products and future
estimates of expenses to be incurred. Our assumptions regarding pricing are
based upon the average pricing over the commodity cycle (generally five years)
due to the inherent volatility of commodity product pricing. These prices are
estimated from information gathered from industry research firms, research
reports published by investment analysts and other published forecasts. Our
estimates of expenses are based upon our long-range internal planning models
and our expectation that we will reduce product costs that will offset
inflationary impacts.

Due to the numerous variables associated with our judgments and
assumptions relating to the valuation of assets in these circumstances, and the
effects of changes in circumstances affecting these valuations, both the
precision and reliability of the resulting estimates of the related impairment
charges, if any, are subject to substantial uncertainties. Consequently, as
additional information becomes known, we may change our estimates
significantly.

Pension Plans.
Most of our U.S. employees and many of our Canadian employees participate
in defined benefit pension plans sponsored by LP. We account for the
consequences of our sponsorship of these plans in accordance with
accounting principles generally accepted in the U.S., which require us to make
actuarial assumptions that are used to calculate the related assets,
liabilities and expenses recorded in our financial statements. While we
believe we have a reasonable basis for these assumptions, which include
assumptions regarding long-term rates of return on plan assets, life
expectancies, rates of increase in salary levels, rates at which future values
should be discounted to determine present values and other matters, the amounts
of our pension related assets, liabilities and expenses recorded in our
financial statements would differ if we used other assumptions. See
further discussion related to pension plans below under the heading Defined
Benefit Pension Plans and in Note 13 of the Notes to the financial statements
included in Item 8 in our Annual Report on Form 10-K for the year ended
December 31, 2004.

Our net income for the second quarter of 2005 was $100 million, or
$0.90 per diluted share, on sales of $692 million, compared to the second
quarter of 2004 net income of $192 million, or $1.75 per diluted share, on
sales of $790 million. For the second quarter of 2005, income from continuing
operations was $104 million, or $0.94 per diluted share, compared to income
from continuing operations of $188 million, or $1.71 per diluted share, for the
second quarter of 2004.

Our net income for the six months ended June 30, 2005 was $202 million,
or $1.82 per diluted share, on sales of $1.4 billion, compared to the six
months ended June 30, 2004 net income of $299 million, or $2.73 per diluted
share, on sales of $1.5 billion. For the six months ended June 30, 2005, income
from continuing operations was $210 million, or $1.89 per diluted share,
compared to income from continuing operations of $298 million, or $2.72 per

19

diluted share, for the six months ended June 30, 2004. For the
comparable six-month period of 2004 results included charges primarily for the
early extinguishment of debt, impairments of long-lived assets, litigation and
other operating charges and credits totaling $63.4 million.

Our results of operations for each of our segments are discussed below
as well as for the other category, which comprises products that are not
individually significant.

OSB

Segment sales, profits and depreciation, amortization and cost of
timber harvested for this segment are as follows:

Quarter Ended June 30,

Six Months Ended June 30

2005

2004

Change

2005

2004

Change

Net sales

$

404

$

536

-25

%

$

820

$

993

-17

%

Operating profits

$

147

$

309

-53

%

$

318

$

563

-44

%

Depreciation, amortization and cost of
timber harvested

$

22

$

20

$

44

$

42

Percent changes in average sales prices and unit shipments for the
quarter and six months ended June 30, 2005 compared to the quarter and six
months ended June 30, 2004 are as follows:

Quarter Ended June 30,
2005 versus 2004

Six Months Ended June 30,
2005 versus 2004

Average Net

Unit

Average Net

Unit

Selling Price

Shipments

Selling Price

Shipments

Commodity OSB

(27

)%

3

%

(19

)%

3

%

OSB prices declined for the second quarter and the first six months of
2005 as compared to the corresponding periods of 2004 due to better balance
between supply and demand. The reduction in selling price accounted for a
decrease in net sales and operating profits of approximately $142 million for
the quarter and $193 million for the first six months.

Compared to the second quarter and first six months of 2004, the
primary factor, along with the reduced sales price, for decreased operating
profits was the significant increase in petroleum based raw materials and wood
fiber. Compared to the same periods in 2004, resin costs per unit increased
over 40% and wood fiber cost per unit over 15%. Additionally, a significant
portion of our OSB costs are denominated in Canadian dollars. The Canadian
dollar has strengthened significantly since the first half of 2004 which causes
our cost stated in U.S. dollars to increase.